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New Mexicans must protect the land grant permanent fund

September 13, 2003

Letter to the Editor

On September 23, New Mexicans will be asked to vote on a constitutional amendment to increase distributions from the Land Grant Permanent Fund to pay for a comprehensive education reform bill passed earlier this year by the Legislature.

While I respect Gov. Richardson, and support his policies on economic development, tax reduction and education reform, I must disagree with his funding scheme to pay for the education package. I believe it is irresponsible to attempt to balance the budget with our childrenís education savings account.

Funding education is our business at the State Land Office. In FY-2003, more than $276 million was distributed to New Mexico’s public schools. I support greater accountability in our public schools and I support compensating teachers.

My wife, Sandy, is a teacher. My children, Kimberly and Daniel are enrolled in public school, and my daughter Amy attends the School for the Visually Handicapped. During my tenure in the New Mexico State Senate I supported $800 million worth of education reforms and teacher pay raises. As your Commissioner of Public Lands it is my job to preserve our children’s education trust fund.

The Land Grant Permanent Fund was created more than 100 years ago by our state’s founding fathers with the idea in mind that it would serve as a reliable source of funding for New Mexico’s public schools. Despite the rhetoric, the permanent fund is not a “rainy day” fund; it is an endowment that is required by constitution to benefit our public schools indefinitely.

Right now, the corpus of the fund is about $6.8 billion and our state constitution calls for an annual payout of 4.7% of the five-year average market value of the funds. That percentage allows the endowment to survive unstable markets and a fluctuating economy, and allows it to continue to grow.

In fact, the New England Pension Consultants, the Richardson administration’s very own financial consultants, warn against his spending plan. In a recent report, NEPC indicated that the long-term spending target for endowments larger than $1 billion is 4.9% and that there are long-term benefits of controlled spending rates well below 5%. Raiding the permanent fund would require a 9-11% return on our investments annually in order to maintain the growth of the fund. At a 5.8% distribution rate, the probability of meeting the required return is less than 48%. In FY2001-FY2003 the permanent fund lost $1.2 billion due to an unpredictable stock market and a poor economy. That equates to a $46.8 million loss to our public schools.
It is clear that Gov. Richardson is gambling with our livelihood and that of generations to come.

We must also remember that oil, gas and mineral royalties contribute 92% of the Land Grant Permanent Fundís income. Oil, gas and minerals are a non-recurring source of revenue; they are non-renewable resources. When they’re gone, they’re gone, in which case we must have a strong corpus on which to continue building, or future generations of New Mexicans will be out of luck.

Moreover, budget demands increase annually and public schools become accustomed to operating at certain funding levels. Therefore, taxpayers should question how the state intends to make up the lost revenue our public schools will have come to depend on when the increased distributions start decreasing in eight years. A tax hike is inevitable. When we can’t cover our bills our state’s leaders will have no other alternative than to RAISE your TAXES.

Not to mention that, the current distribution rate saves every New Mexico taxpayer at least $400 a year. Should the amendment pass, the taxpayers can be sure that savings will become obsolete.

I support quality education for not just one generation of children, but for future generations as well. The FY-2004 budget appropriated $2 billion to New Mexico’s public schools, half of our entire state budget. The initial payout of $78 isn’t going to save our schools, but it could very well put our education trust fund in jeopardy and future generations of children at risk.

I ask New Mexicans to make an informed, responsible decision. Voting “no” on September 23 is a vote for, not against, our children’s education.